by

Chairman Mary L. Schapiro

U.S. Securities and Exchange Commission

Department of Labor
Washington, D.C.
June 18, 2009

Good morning and welcome. I would like to begin by thanking Secretary Hilda Solis, Deputy Secretary Seth Harris and their dedicated staff at the Department of Labor for hosting this event and working with the SEC staff to hold this joint hearing. I truly believe that investors will benefit from our productive collaboration.

Target date funds have become an increasingly popular investment option for Americans investing for retirement and educational needs. These funds and other similar investment options are financial products that allocate their investments among various asset classes. These funds automatically shift that allocation to more conservative investments as a “target” date approaches. This shifting allocation is frequently referred to as a fund’s “glide path.”

The “set it and forget it” approach of target date funds can be very appealing to investors. Target date funds were expected to make investing easier for the typical American and avoid the need for investors to constantly monitor market movements and re align personal investment allocations.

But, the reality of target date funds was quite surprising to many investors last year. It has been reported that the average loss in 2008 among 31 funds with a 2010 target date was almost 25 percent. Perhaps even more surprising were their widely varying performance results. Returns of 2010 target date funds in 2008 ranged from minus 3.6 percent to minus 41 percent.

These varying results should cause all of us to pause and consider whether regulatory changes, industry reforms or other revisions are needed with respect to target date funds. And this is what I hope today’s joint hearing will help us assess.

I look forward to an in-depth discussion of target date funds, their construction, their role in retirement investing, their allocation to various investment classes, and the understanding — or perhaps misunderstanding — of target date funds by retail investors. I am particularly interested in how SEC regulations, including our disclosure requirements, impact target date funds. For example, do our regulations foster investor understanding of target date funds, their risk characteristics, their fees and the meaning of a particular “target date” in a fund’s name? And, of course, I am interested in whether it is necessary to improve SEC regulations to address any deficiencies with respect to target date funds.

Of all of the issues that the SEC is examining at the moment, our review of target date funds is one that may most directly affect everyday Americans seeking to access our securities markets to help build a better life, and a greater sense of financial security, for themselves and their families. We owe these workers and other investors our commitment to addressing target date fund issues for their benefit. I believe that today’s hearing, which features a number of respected experts and impassioned thought leaders, will help advance the understanding of these funds and help crystallize our thoughts on the role of target date funds in a retail investor’s retirement portfolio.

As you know, the Administration is in the midst of overhauling the entire regulatory landscape with the goal of better protecting investors and restoring confidence in the markets. And, we are doing our share within each of our own agencies to achieve these goals as well. Today’s effort is one such example.

I want to thank all of today’s joint hearing participants for volunteering to share their views and insights with us. I look forward to learning from you and to engaging in a meaningful dialogue on target date funds.

Finally, I would like to thank the staff members at the SEC who worked with the Department of Labor to bring this event about, primarily Buddy Donohue and Tara Buckley.